Foreign Investors Turn Net Sellers In July Amid US-India Trade Tensions, Dump Equities Worth Rs 5,524 Crore So Far

After a consistent inflow over the past three months, foreign investors have reversed course, withdrawing a net Rs 5,524 crore from Indian equities so far in July. The selling pressure comes amid rising trade tensions between India and the United States, coupled with mixed corporate earnings that have raised concerns over sustained profitability.

Data from depositories revealed that the total foreign portfolio investment (FPI) outflow for 2025 has now reached Rs 83,245 crore, marking a significant pullback in foreign investor participation, reported PTI.

In contrast, the previous three months had seen steady inflows—Rs 14,590 crore in June, Rs 19,860 crore in May, and Rs 4,223 crore in April—indicating a notable shift in market sentiment.

According to Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Research India, “The trajectory of FPI flows will hinge on developments in the US-India trade negotiations and corporate earnings. A resolution of the trade disputes and earnings recovery could potentially restore investor confidence and attract FPIs back to Indian markets.”

Cautious Sentiment Driven by Valuations and Global Factors

The pullback by FPIs appears to be driven by multiple concerns. Elevated stock valuations have prompted a reassessment of Indian equity attractiveness, while uncertainty surrounding US interest rate policy and the ongoing diplomatic and trade friction between Washington and New Delhi has added to the cautious outlook.

Additionally, earnings results have been mixed, raising doubts about the sustainability of corporate growth in the near term. “Mixed corporate earnings have raised questions over the resilience of profitability,” Srivastava noted.

Echoing similar views, Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, said that broader global market trends, macroeconomic developments, and India's earnings season contributed to the bearish sentiment among foreign investors.

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Debt Market Sees Modest Inflows Despite Equity Outflows

While equity markets bore the brunt of FPI exits, the debt segment saw modest inflows. FPIs invested Rs 1,850 crore under the debt general limit and Rs 1,050 crore through the voluntary retention route during the same period. This suggests a selective risk-on approach by foreign investors who are still seeking stability in fixed-income instruments amid broader equity volatility.

With foreign investment closely tied to geopolitical and macroeconomic signals, market watchers expect the coming weeks to remain volatile unless clarity emerges on trade ties and corporate performance.

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